On October 7, cryptocurrency exchange-traded product (ETP) issuer 21Shares urged European Union (EU) regulators to establish a unified framework for integrating digital assets into investment products. The company emphasized the need for clear regulations to facilitate broader access to cryptocurrency for European investors, urging the European Securities and Markets Authority (ESMA) to provide consistent guidelines for UCITS funds, a popular investment vehicle in the EU.
Inconsistent Regulations Hurting Crypto Adoption
The current regulatory landscape in the EU is fragmented, with countries like Germany and Malta allowing crypto holdings in UCITS funds, while others, such as Luxembourg and Ireland, prohibit them. This inconsistency creates confusion and impedes investors’ access to digital assets through regulated channels. UCITS funds encompass products like exchange-traded funds (ETFs) and ETPs, which are widely used by retail investors in Europe.
Mandy Chiu, Head of Financial Product Development at 21Shares, stated, “The current patchwork of regulations is creating confusion and preventing retail investors from accessing the full potential of crypto assets.”
This regulatory disparity exposes investors to potential risks, as they may be forced to seek crypto exposure through unregulated avenues, increasing the possibility of fraud or market manipulation. Additionally, a unified regulatory approach would provide much-needed transparency and protection for both retail and institutional investors, empowering them to make informed decisions about incorporating digital assets into their portfolios.
21Shares Highlights Growing Maturity of Crypto Market
21Shares highlighted the evolution of the digital asset market, noting improvements in transparency, liquidity, and security measures that mirror traditional financial instruments. Leading global exchanges and custodians have implemented robust data reporting and safeguards, reducing risks such as hacking and market manipulation. These advancements pave the way for regulated inclusion of digital assets in UCITS funds, offering investors a secure and cost-effective means to gain exposure to the cryptocurrency market.
A Call for Streamlined Crypto Integration in Europe
21Shares’ call for regulatory reform comes at a critical time. In May 2024, ESMA launched a consultation process to review eligible assets for UCITS funds, which concluded in August. The regulator is now evaluating feedback and considering changes to the regulatory framework. A unified approach for indirect crypto exposure through ETPs could open new opportunities for European investors to diversify their portfolios.
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By establishing clear guidelines, ESMA could unlock the potential for the EU to become a leader in financial innovation, aligning with progressive markets like the U.S. and Hong Kong. A unified framework would not only benefit investors but also solidify Europe’s position as a global hub for crypto innovation.
21Shares is a prominent player in the ETP space, with over 40 products listed across 11 exchanges. The company’s U.S.-based spot Bitcoin ETF, co-managed with ARK Invest, already manages $2.64 billion in assets, demonstrating strong investor appetite for regulated crypto exposure. A consistent EU framework could pave the way for further growth and expansion in the European crypto market.For the EU, this is more than just about regulating crypto—it’s about securing a competitive edge in the financial future.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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